ABC's of Better Baby Clothes

A new business model for addressing the rapid turnover of kids’ apparel

Before enrolling at UCLA Anderson, Rob Rebholz ('13) and two of his colleagues at A.T. Kearney's Munich office would hang out and kick around different business ideas. "One day, my colleague Alex, who had a baby boy, complained to us about how fast his son was outgrowing his clothes," Rebholz says. Perhaps because they were business analysts, that conversation led the trio from the high cost of children's clothing into more esoteric conversations about the flaws in traditional retail models.

And that conversation led Rebholz and his partners to found KinderStuff, the first web-only baby fashion brand to offer a take-back program, allowing consumers to send back clothes their kids have outgrown. The trio left A.T. Kearney to devote their efforts full-time to the company. "We decided to go for it for a couple of reasons," Rebholz says. "A, we thought it was both a good idea and a big idea. And B, we thought that our team could make the business work."

KinderStuff's business model addresses one of the ongoing burdens of parenthood: Kids grow; their clothes don't. KinderStuff's remedy is simple. The company manufactures its own line of children's clothing, and, as a child gets bigger, parents are free to return their purchases in exchange for a discount on subsequent purchases. Returned items are either resold or donated to local charities.

There's more. Rebholz calls KinderStuff a "closed system" because they manufacture, sell and then recycle their offerings. That closed system enables the company to keep prices low by eliminating the high costs associated with retail stores, the cut taken by wholesalers and the mark-ups demanded by name brands. Also, while most major fashion labels manufacture in low-cost countries, KinderStuff's products are made in Germany (and soon in the United States), ensuring both fair labor practices and eco-friendly production. At the moment, the clothes are aimed at kids through age two. There's a cast of characters to adorn the onesies - Lucky Sheep, Eddy the Teddy, Benny the Bunny - with bright colors and simple styles. The organic fabrics ensure a safe, soft, comfortable experience for a child.

Kinderstuff's total investments have surpassed USD 1 million. As they work to prove their model in the marketplace, the plan is to transfer funds to the U.S. operation. That's where Rebholz comes in. With his partners ensconced in Germany, Rob started applying to B-schools. He set his sights on UCLA Anderson. "UCLA Anderson is known for the entrepreneurial community fostered within the school," Rebholz says. "I was looking to come to the United States to do business school and look at the U.S. market for KinderStuff. "We believe in the idea more than ever," Rebholz says. "But there are still some challenges, from IT to manufacturing, that need to be addressed. One of the biggest challenges is the marketing, which is so important when launching a brand from scratch." The company kicked off its stateside operation earlier this year, with Rebholz doing double duty running the company from its Los Angeles offices while completing his second-year studies at UCLA Anderson. The double-life proved beneficial for Rebholz, who focused on his entrepreneurial goals from the moment he touched down in Los Angeles.

"The UCLA Anderson experience helped in so many ways," Rebholz says, "The school has an amazing network of entrepreneurial alumni, some of whom were very helpful. My fellow students really went out of their way to support me on projects and in classes. Also, the Price Center [for Entrepreneurial Studies] was very supportive, I got several fellowships through them. Most importantly, I learned how to think like an entrepreneur, how to get funded and how to market a new product." Rebholz also likes to quote fellow UCLA Anderson alumnus, marketing guru Guy Kawasaki ('79), who famously tells entrepreneurs to: "Ship, then test." Rebholz explains "the mindset in Germany is different. People are reluctant to start companies. Germans are often trying to be too perfect and risk averse. I like Guy's advice to get your product to market, get feedback, then improve your offering." With the company still in its own infancy, KinderStuff is generating revenue, but is not yet profitable. They've generated a wide variety of press, from publications like Wired, which focused on the e-commerce model, to parenting publications that touted the quality of the clothing, affordable prices and recycling program.

"UCLA Anderson experience helped in so many ways," Rebholz says. "I learned how to think like an entrepreneur, how to get funded and how to market a new product."

KinderStuff's future is full of the same potential possessed by its young customers. Rebholz says the take-back business model excites the venture capital community, and, if it proves successful, could lead to other products. The company is already looking at the possibility of expanding the product line beyond toddlers, to children up to age six. Recently graduated, Rebholz has no plans to leave Southern California. "I believe in the U.S. market," he says. "And L.A. is the perfect place for an e-commerce fashion company. There are a lot of tech startups, access to talent and a positive branding effect to being in Los Angeles. "Also, I just love living here."